It’s still early days in the transition from the industrial age to the information age. Crises tend to accelerate trends that are already happening, and Covid has certainly accelerated the shift to a digital economy. It has drawn a clear line between companies that are on the right side of time and those that are in decline.
In a post-pandemic world, it’s unclear if the growth in digitally-native companies will be as dramatic as what we’ve seen in 2020. What is clear is that we have established a new floor for the digital economy that we are unlikely to breach. For example, companies will continue to invest in cloud computing services to enable employees to work from anywhere while strengthening digital security. Consumers will likely continue to shift buying patterns to online retailers as convenience, shipping time and pricing all continue to become more favorable. And at least a portion of business travel is likely to shift to video meetings permanently.
We have observed legacy companies struggle to make the transition to technology-enabled platforms. This, combined with easy access to capital, has the potential to enable zombie companies. For example, a US drug store chain’s CEO was asked a couple years ago about the challenges posed by a well-known online retailer’s plan to expand into selling prescription drugs. The CEO said he was not worried. Two years and billions of dollars in share buybacks later, this retailer is no better prepared for its online challenger, which has used incumbent complacency as an opportunity to vastly improve their platform.
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